Company moves to repossess 28 locomotives from B&A

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BANGOR – A San Francisco leasing company will go to court next week to repossess 28 locomotives and numerous cars from two Bangor and Aroostook System rail lines for failure to make “millions of dollars” in payments.

The rail lines, however, say they are in a “major dispute” with Helm Financial Corp. over the quality and power of the engines, and has been fighting the leases for at least three years.

A hearing is scheduled for Dec. 15 at Bangor District Court.

Bangor and Aroostook System, whose parent company is Iron Road Railways, includes Bangor and Aroostook Railroad, Canadian American Railroad, Quebec Southern Railway, Northern Vermont Railroad and Logistics Management Systems.

The locomotives and rail cars being repossessed are being used by B&A Railroad and Canadian American Railroad, according to court documents.

In court documents, Helm Financial does not list how much it says is owed by the Bangor-based rail lines. What is included in the documents are letters alerting the rail lines that the leases were terminated in mid-November, and subsequent notarized “forcible entry and detainer,” or repossession, summonses were issued.

“We’re past due millions of dollars,” said Helm Financial spokeswoman Barbara Wilson on Friday. “We’ve inspected the units and they have not been maintained in accordance with the lease. We need to go get those units back.”

No formal legal responses from the rail lines are included in the court documents.

But Dan Sabin, vice president and chief operating officer for B&A Railroad, said that company has been renegotiating the leases with Helm Financial for about three years because of a “major dispute” over the quality of the locomotives.

“We’re in a substantial dispute on the quality of power” of the locomotives,” Sabin said Thursday. “We’ve asked to terminate their lease because of the poor quality of their locomotives. Most of them are in service but they’re not satisfactory for our increase in service, our increase in revenue.”

“That’s the first we’ve heard of it,” Helm’s spokeswoman responded Friday. “We’ve been working with them for three years. The payments have not been coming in. We’re a small, private company. We don’t have a lot of options.

“If they didn’t want them, we would just take them back,” Wilson said. “It’s that simple.”

Sabin, in turn Friday, would not counter Wilson’s remarks.

“We’ve been trying to negotiate in good faith for a couple of years, and it will just settle itself out in court,” Sabin said. “I don’t think we should be negotiating in the press.”

According to court documents, leases on the equipment, including monthly payments, were renegotiated several times. B&A and Canadian American started leasing rail cars and locomotives from Helm in 1995. Some of the leases run through 2005.

B&A Railroad dislikes use of the word “repossession” that’s now being circulated in its legal matter with Helm Financial, Sabin said.

“That’s your word, not mine,” he said Friday.

Instead, Sabin said, “rumors” that the locomotives were being repossessed were circulating throughout New England for at least a week. He said the talk is a misinterpretation of the lease renegotiations.

“Sometimes these equipment negotiations get to be very heated,” Sabin said. “We’ve received several calls from people.”

Helm Financial, according to court documents, wants returned 28 locomotives, 33 boxcars and 15 open-top rail cars because of failure by both B&A Railroad and Canadian American Railroad to make monthly payments on them.

B&A System has about100 locomotives in service.

The repossession is one of at least two financial issues facing the rail lines.

Next week the B&A System board of directors will gather to discuss seeking an infusion of $10 million to $20 million in cash.

Sabin said the company would meet with equity investment firms as part of its recapitalization plan. Last year, B&A received $45 million in new capital.

What kind of financial situation the privately owned rail lines are in is not known.

“Certainly money’s been tight, but we are not facing any type of bankruptcy, I can ensure you of that,” Sabin said Thursday. “There certainly is no discussion of bankruptcy at all.”

Repossession of locomotives and rail cars is different from a repossession of a car, Wilson said. If the court agrees that the property should be returned, Helm Financial will serve the rail lines with a deposition telling them to take the equipment to a railway interchange point somewhere in the country. Another railroad, then, is hired to hook up the locomotives and cars and bring them to a specified location.

“So you need the cooperation of the railroad,” Wilson said.

B&A is looking to either lease or buy new locomotives, Sabin said.